Merkel partner in disarray after shock resignation

BERLIN (Reuters) - A leader in Germany's Free Democrats resigned unexpectedly on Wednesday in the latest sign of turmoil in the party that shares power with Chancellor Angela Merkel's conservatives.

Christian Lindner, general secretary of the beleaguered FDP and a rising star seen as a potential future chairman, stepped down in a move which appeared to be linked to the poor turnout in a party referendum on euro zone rescue moves.

Merkel faced further turbulence from a growing scandal engulfing President Christian Wulff, an ally she nominated for the largely ceremonial post last year. Wulff has denied accusations he misled a regional parliament over a private loan.

Merkel's spokesman said she had full confidence in Wulff and has no reason to doubt his comments about a private 500,000-euro loan for his house. Bild newspaper reported Wulff obtained the loan from a businessman friend at favorable interest rates.

Wulff told the regional parliament last year when he was state premier he had no business dealings with the friend. Bild said the businessman's wife had lent him the 500,000 euros. German editorials attacked Wulff for being less than forthright.

"Merkel has full confidence in the person and conduct of Mr. Wulff," said spokesman Steffen Seibert. "He's a good president."

'BAMBI' LINDNER LOST HIS NERVE

The Lindner resignation exposed deep splits in the party over whether to support Merkel's efforts to bolster weak euro zone members. If they widen, it could destabilize her coalition.

"He lost his nerve," a senior FDP official told Reuters when asked about Lindner's move.

Lindner, 32, had responsibility for organizing the referendum which was forced upon the party leadership by a group of eurosceptics within the FDP. Lindner was given the unflattering nickname "Bambi" by a FDP leader years ago and it stuck to the photogenic young man with the baby face.

His departure is the latest setback for the FDP, a pro-business party whose support has fallen to just 3 percent in opinion polls after it won a record 14.6 percent in the 2009 election, helping Merkel secure a second term.

"It's possible that Lindner wanted to abandon ship before it was too late," said Gero Neugebauer, political scientist at Berlin's Free University. "In any event it will exacerbate the FDP's crisis. The FDP has lost touch with its grass roots."

The normally loquacious Lindner made a short, terse statement to journalists at FDP headquarters in Berlin, but then left without taking questions, saying only "Auf Wiedersehen."

"There comes a time when you have to make room to allow for a new dynamic," said Lindner, a polished speaker who previously worked in the advertising industry. "The events in recent weeks and days have strengthened my belief that this is the case."

Angry that the FDP leadership was backing Merkel's euro rescue moves, eurosceptics led by lawmaker Frank Schaeffler led a campaign in recent months to collect signatures within the party for the referendum, which is non-binding.

Their idea was send a signal to the leadership by showing them that grass-roots FDP members opposed euro rescue moves.

The referendum, whose results are expected to be published on Friday, is unlikely to pass because the required quorum of FDP members is not expected to be reached.

Of the 64,000 members of the party, 21,000 needed to take part for it to be valid.

The failure to reach a quorum would cast a poor light on Lindner, who was charged with organizing the voting.

He faced criticism for not doing enough to promote the pro-European position of the FDP executive board. He also came under fire for calling Schaeffler "the David Cameron of the FDP" because he wanted to isolate the party in Europe.

Political scientists say many FDP members may have shunned the vote because they actually support the euro sceptics' views but did not want to directly damage the FDP leadership.

Lindner married a newspaper reporter in August. He also obtained a license to drive racing cars two years ago.